Date: Mar 26, 2026

Pre-Redemption Entitlement of Georgia Security Deed Holders to Tax-Sale Excess Funds Under O.C.G.A. § 48-4-5(a)

I. Introduction

Eddie Denhardt v. Wells Fargo Bank N.A. (11th Cir. Mar. 23, 2026) is an unpublished Eleventh Circuit diversity decision addressing who may claim excess funds generated by a Georgia tax sale before any redemption occurs. Eddie Denhardt (plaintiff-appellant), as assignee of the former property owners (the Loftins), sued Wells Fargo (defendant-appellee), the successor to Wachovia and the holder of a security deed on the property.

The dispute arose after a 2020 tax sale produced excess proceeds ($56,639.33) held by the county tax commissioner. In 2021, Wells Fargo claimed the excess funds as “the successor in interest to Wachovia,” the record owner of a security deed. Later, Wells Fargo redeemed the property and eventually foreclosed. Years after the tax sale, the Loftins purported to assign their interest in the excess funds to Republic Title Company LLC, which assigned to Denhardt. Denhardt then alleged state-law claims for conversion and money had and received, premised on the theory that Wells Fargo had no legal entitlement to the excess funds.

The central issue on appeal was narrow: whether, under Georgia law, a security deed holder is entitled to claim excess funds from a tax sale before the property is redeemed.

II. Summary of the Opinion

The Eleventh Circuit affirmed the Rule 12(b)(6) dismissal. Applying Georgia law as interpreted by Georgia appellate courts, the panel held that Wells Fargo could claim the tax-sale excess funds as the “record owner of [a] security deed affecting the property” under O.C.G.A. § 48-4-5(a). The court concluded that the Georgia Supreme Court’s decision in DLT List, LLC v. M7VEN Supportive Hous. & Dev. Grp. did not control because it addressed a different question—whether a redeeming creditor’s statutory lien under O.C.G.A. § 48-4-43 reaches excess funds after redemption. Instead, the Eleventh Circuit followed two Georgia Court of Appeals decisions—Performance Food Group, Inc. v. Davis and Home Equity Credit Series 2021, LLC v. Labat—which recognize potential entitlement of security deed holders to excess funds based on the text of § 48-4-5(a) and the nature of a security deed holder’s title under O.C.G.A. § 44-14-60.

The court also rejected reliance on Jackson v. Wellington & Assocs. LLC as persuasive authority against Wells Fargo, distinguishing it as a case focused on the post-redemption lien created by § 48-4-43 rather than pre-redemption entitlement under § 48-4-5(a), and noting that Labat undercut any broader reading of Wellington. Finally, the panel declined to certify the question to the Georgia Supreme Court.

III. Analysis

A. Precedents Cited

1. Framework for Erie prediction and deference to state courts

Erie R. Co. v. Tompkins, 304 U.S. 64 (1938): The foundational rule that federal courts sitting in diversity apply state substantive law. Here, it anchors the court’s duty to identify and apply Georgia law governing entitlement to tax-sale excess funds.
Stoner v. N.Y. Life Ins. Co., 311 U.S. 464 (1940): The key operational rule used in the opinion—federal courts must follow intermediate state appellate decisions absent “convincing evidence” the state’s highest court would decide differently. This principle is decisive because the Georgia Supreme Court had not resolved the exact pre-redemption security-deed/ excess-funds question.
Veritas v. Cable News Network, Inc., 121 F.4th 1267 (11th Cir. 2024): Reiterates the Eleventh Circuit’s approach to applying state law in diversity.
Saxton v. ACF Indus., Inc., 254 F.3d 959 (11th Cir. 2001): Reinforces that federal courts apply state law as declared by the state’s highest court, underscoring the “DLT List controls?” inquiry.
State Farm Fire and Cas. Co v. Steinberg, 393 F.3d 1226 (11th Cir. 2004): Used to downrank the persuasive weight of federal district court diversity decisions (like Wellington) when intermediate state appellate authority exists.
Florida Comm'r of Agric. v. Att'y Gen., 148 F.4th 1307 (11th Cir. 2025): Supplies the de novo Rule 12(b)(6) standard of review and pleadings posture.

2. Georgia tax-sale and redemption structure

Bridges v. Collins-Hooten, 792 S.E.2d 721 (Ga. Ct. App. 2016): Provides the general mechanics of Georgia tax sales, including the purchaser’s defeasible fee and the one-year redemption period.
Nat'l Tax Funding, L.P. v. Harpagon Co., LLC, 586 S.E.2d 235 (Ga. 2003): Quoted for the proposition that, when a creditor redeems, the redemption amount becomes a first lien (“super-lien”) on the real property.

3. The central interpretive split: post-redemption lien vs pre-redemption entitlement

DLT List, LLC v. M7VEN Supportive Hous. & Dev. Grp., 800 S.E.2d 362 (Ga. 2017): Held that excess funds are personal property separate from the real property, and therefore a redeeming creditor’s priority lien under O.C.G.A. § 48-4-43—being specific to the real property—does not extend to excess funds. The Eleventh Circuit treated DLT List as important but not controlling because it addressed the scope of a statutory lien after redemption, not who may claim excess funds before redemption.
Performance Food Group, Inc. v. Davis, 816 S.E.2d 468 (Ga. Ct. App. 2018): Although reversing summary judgment for lack of competent evidence, it stated that the excess funds “should have been distributed first to the Bank” as the first-priority security deed holder at the time of the tax sale, and that later foreclosure events did not change the proper payee of the excess funds.
Home Equity Credit Series 2021, LLC v. Labat, 915 S.E.2d 82 (Ga. Ct. App. 2025): The most on-point authority. Construing the plain language of O.C.G.A. § 48-4-5(a), Labat held that “record owner[s] of each security deed” fall within the statute’s class of “owner or owners” to whom excess funds are “available for distribution” in priority order, and it emphasized that security deed holders hold “actual title” under O.C.G.A. § 44-14-60—distinguishing them from mere lienholders.
Flat Creek Falls, LLC v. Labat, 892 S.E.2d 188 (Ga. Ct. App. 2023): Applied DLT List to hold that a demolition lienholder was not entitled to excess funds because its lien ran against real property, while excess funds are personal property. The Eleventh Circuit, echoing Labat (2025), treated Flat Creek Falls as supporting the distinction between lienholders (no entitlement) and security deed holders (potential entitlement as “owners” under § 48-4-5(a)).

4. Authorities invoked by Denhardt and treated as non-controlling

Georgia Lien Servs., Inc. v. Barrett, 613 S.E.2d 180 (Ga. Ct. App. 2005) (citing Horn v. Gilley, 428 S.E.2d 568 (Ga. 1993)): Quoted for the general proposition that a quitclaim deed conveys only whatever interest the grantor has in real property. Denhardt used this line of authority to analogize security deed interests to “real property only,” but the Eleventh Circuit found that § 48-4-5(a) and Labat’s interpretation answered entitlement without needing to resolve the private-instrument scope argument.
Jackson v. Wellington & Assocs. LLC, 389 F. Supp. 3d 1199 (N.D. Ga. 2019): Treated as distinguishable and, to the extent it could be read broadly, as superseded in persuasive force by Labat. The panel emphasized that Wellington focused on post-redemption lien arguments under § 48-4-43 rather than pre-redemption entitlement under § 48-4-5(a).

B. Legal Reasoning

Framing the legal question correctly (DLT List does not decide it). The court treated Denhardt’s argument as an attempt to extend DLT List’s “excess funds are personal property” holding to defeat any security deed holder’s claim. But the panel drew a sharp doctrinal boundary: DLT List decided only that a redeeming creditor’s statutory first-priority lien under § 48-4-43 does not attach to excess funds. It did not decide whether a security deed holder is within the statutory class eligible to receive distribution of excess funds under § 48-4-5(a) before redemption.
Applying Stoner deference to Georgia intermediate appellate decisions. With no Georgia Supreme Court case squarely on point, the Eleventh Circuit relied on Stoner v. N.Y. Life Ins. Co. to follow Georgia Court of Appeals decisions absent “convincing evidence” the Georgia Supreme Court would disagree.
Textual analysis of O.C.G.A. § 48-4-5(a), as adopted in Labat. The key move is statutory: § 48-4-5(a) requires notice of excess funds to be sent not only to the record owner of the property, but also “to the record owner of each security deed affecting the property,” and further states that notice must say “the excess funds are available for distribution to the owner or owners as their interests appear in the order of priority.” Following Home Equity Credit Series 2021, LLC v. Labat, the panel read this as a legislative recognition that security deed holders are among the “owner or owners” whose interests may entitle them to distribution (depending on priority).
Reinforcement from the nature of a Georgia security deed under O.C.G.A. § 44-14-60. Labat’s conceptual underpinning—endorsed by the panel—is that Georgia security deeds are not mere liens: O.C.G.A. § 44-14-60 treats a deed to secure debt as passing “title” to the grantee until the debt is paid, making the conveyance “an absolute conveyance” (subject to reconveyance upon payment). That “title” concept supplies a statutory reason security deed holders can be treated differently from lienholders like those in DLT List and Flat Creek Falls.
Consequences for the pleaded tort claims. Conversion and money had and received both required Denhardt to plausibly allege that Wells Fargo lacked lawful entitlement to the funds. Because Georgia law (as predicted via Labat and supported by Performance Food Group) recognized Wells Fargo’s potential entitlement as security deed holder, the complaint failed on its own theory—warranting dismissal.
Scope limitation: “may be entitled,” priority-dependent. The panel emphasized (via its footnote) that it held only that security deed holders may be entitled because § 48-4-5(a) requires distribution “in the order of priority.” Denhardt did not argue that his assigned interest had priority over Wells Fargo; he argued Wells Fargo had no interest at all.
Certification denied. Despite the state-law sensitivity, the panel declined to certify the question to the Georgia Supreme Court, implicitly reasoning that existing Georgia Court of Appeals authority (especially Labat) sufficiently resolved the predictive inquiry.

C. Impact

Clarifies (in federal diversity litigation) the governing Georgia rule pre-redemption. The decision operationalizes Labat and Performance Food Group in the Eleventh Circuit: when excess funds arise from a Georgia tax sale, a “record owner of each security deed” is within the statutory universe of potential recipients under § 48-4-5(a), notwithstanding DLT List’s characterization of excess funds as personal property.
Limits DLT List to its lane. Litigants can no longer treat DLT List as a universal bar against secured lenders claiming excess funds. It is a bar against using the § 48-4-43 redemption lien to reach excess funds; it is not a definitive answer to § 48-4-5(a) entitlement questions.
Practical effect on tax commissioners and interpleader practice. Because § 48-4-5(a) mandates notice to security deed holders and contemplates distribution by priority, counties may face increased competing claims among owners, security deed holders, and other recorded claimants—making § 48-4-5(b) interpleader more likely in contested cases.
Effect on assignees of former owners. Parties acquiring assignments from delinquent taxpayers after a tax sale (as Denhardt did) face a substantial obstacle if a security deed holder held a first-priority interest at the time of sale. Assignment alone does not defeat statutorily recognized competing “owner” interests.
Foreclosure and redemption sequencing. Performance Food Group’s reasoning—endorsed as supportive—signals that later events (redemption, foreclosure) do not necessarily alter who was entitled at the time excess funds should have been distributed, sharpening attention on the status and priority of recorded interests as of the tax sale date.

IV. Complex Concepts Simplified

Tax sale and “defeasible fee”: In Georgia, a tax sale purchaser gets a temporary, defeasible ownership interest: it can be undone if someone with redemption rights redeems within the statutory period.
Redemption: Redemption is the statutory process of paying the required amounts to undo the tax sale. After redemption, the tax sale is essentially rescinded.
Excess funds: If the tax sale price exceeds the taxes, costs, and sale expenses, the remaining “excess” is held by the county and distributed under O.C.G.A. § 48-4-5.
Security deed (Georgia-specific): Unlike many “mortgage lien” states, Georgia treats a deed to secure debt as passing legal title to the lender until the debt is paid (O.C.G.A. § 44-14-60). That “title” concept helps explain why Georgia courts may treat a security deed holder as an “owner” for some statutory purposes.
Redeeming creditor’s “super-lien” vs. security deed rights: The redeeming creditor’s lien under O.C.G.A. § 48-4-43 is a statutory lien tied to the real property. DLT List held that lien does not reach excess funds (personal property). Separate from that, § 48-4-5(a) addresses who may receive excess funds in the first place—where Labat treats security deed holders as potential “owners.”
Conversion and money had and received: Both claims generally require that the defendant wrongfully possesses or retains money/property belonging to the plaintiff. If the defendant had a lawful entitlement under the controlling statute, the claims fail.
Erie / Stoner doctrine (why federal judges talk about state cases): In diversity cases, federal courts must apply state law. If the state supreme court has not answered the exact question, federal courts typically follow intermediate state appellate decisions unless strong evidence suggests the state supreme court would disagree.

V. Conclusion

Denhardt establishes, as an Eleventh Circuit prediction of Georgia law grounded in Georgia Court of Appeals authority, that DLT List does not foreclose a security deed holder’s pre-redemption entitlement to tax-sale excess funds. Instead, relying principally on Home Equity Credit Series 2021, LLC v. Labat and supported by Performance Food Group, Inc. v. Davis, the court treats O.C.G.A. § 48-4-5(a) as recognizing security deed holders—identified expressly as “record owner[s] of each security deed affecting the property”—as potential recipients of excess funds, subject to statutory priority.

The decision’s broader significance lies in its disciplined separation of (1) post-redemption lien scope under § 48-4-43 (DLT List’s domain) from (2) pre-redemption distribution entitlement under § 48-4-5(a), and in its reinforcement that, in Georgia’s title-theory security deed regime (O.C.G.A. § 44-14-60), “ownership” concepts can extend beyond the delinquent taxpayer when distributing tax-sale proceeds.